The Parliament in June 2025 approved amendments to the Law on Corporate Income Tax (CIT), introducing new tax rates and other important amendments effective January 1, 2026.
CIT rate increase
The standard CIT rate (currently 16%) will be increased by 1%, resulting in 17% standard rate. The reduced CIT rate will increase from 6% to 7% respectively (applies to small entities, income from research and development (R&D) activities).
Extended CIT relief for newly established small entities
A 0% CIT rate will be available to newly established small entities (the annual revenue of which does not exceed €300,000) for their first and second tax periods (previously only the first year was exempt from CIT), subject to additional eligibility criteria. For all following periods, a 7% tax rate will apply to small entities’ taxable profits. The existing requirement for small entities limiting the number of employees to no more than 10 will be abolished.
Immediate depreciation for fixed assets
Entities will be entitled to claim an immediate deduction for the full acquisition cost of certain fixed assets (such as machinery, equipment and software) in the year the asset is first placed into service, while disregarding the general depreciation/amortization rules applicable to the fixed assets. This measure is applicable only if the asset remains in use for at least three years and the investment project relief (under Article 46-1 of the Law on CIT) is not applied.
Stricter limitations on the transfer of tax losses between group entities
The amount of tax losses acquired/taken over from other group entities may be used to offset no more than 70% of entity’s taxable profit (currently such limitation only applies to entity’s own losses). Additionally, tax losses calculated for a given taxable period may be transferred to another entity within the same group, provided that a direct or indirect holding of at least two-thirds (2/3) is maintained on the last day of the tax year, of which the tax losses are being transferred as well as on the transfer date. Furthermore, the entities involved must have been part of the group continuously for at least two years before the last day of the tax period for which the losses are transferred.
Extended CIT exemption for large-scale investment projects
Entities carrying out a large-scale investment project and meeting the set requirements are exempt from CIT for 20 years. With the latest amendment this exemption is extended for 10 more years and applies to entities that start implementing large‑scale investment projects by December 31, 2035.
For more information, contact a KPMG tax professional in Lithuania.
